Budget leaves some feeling 'nipped by piranhas'

Julia Gillard set her own test for this budget when she addressed caucus on Monday. In what could be construed as a concession to her foe, Gillard told her charges that Tony Abbott had managed to narrow the political agenda over the autumn break to asylum seekers and the carbon tax.

The budget, she said, was a chance to broaden that agenda to other areas and the government's turf.

She cited jobs, training, welfare and mental health, the key themes of last night's document.

Gillard herself helped overshadow her own budget message and keep the agenda narrow by announcing at the weekend the ''Malaysian solution''. This ensured that asylum seekers and the budget were reported in equal measure over the past few days.

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Today, Abbott and his shadow treasurer, Joe Hockey, will attempt to skew the debate back towards the carbon tax by hammering their claim of past weeks that this budget will have a hole in its heart because it does not take into account effects of the carbon scheme.

''The mining tax is in the budget, the carbon tax is not,'' Hockey said yesterday, noting that both measures are slated to begin on July 1 next year.

Such bunkum.

The mining tax has been finalised, costed, negotiated and details released. The carbon tax has not. Far from it.

Hockey and Abbott are actually arguing that an uncosted, half-baked policy be included in the federal budget.

When the details are finished and announced, probably in July, there will be a statement released on its economic impacts, such as forecast effects on revenue and inflation. These will be further incorporated into the midyear economic fiscal outlook, which is the budget update to be released in about six months. It is not as though it can be hidden.

The government says the carbon scheme will be revenue neutral and Wayne Swan has said publicly it will not threaten the return to a forecast surplus of $3.5 billion in 2012-13.

In other words, from a revenue perspective, it will appear in the budget update as not much more than a rather large line item. All the money it raises will be spent on compensation.

Like its ETS predecessor, the carbon price is likely to have an impact on inflation of about 1 percentage point. These are the sorts of fluctuations that you would see in economic parameters between a budget and the midyear update without a carbon tax.

In fact, most numbers released yesterday - growth, surplus and revenue forecasts - will be different come the midyear update because the economic circumstances will be a bit different.

Abbott will not argue much with the welfare reforms or the mental health package announced last night. He has called for similar measures in both areas. He and Hockey will attack the deficit blowouts for this financial year and next, the increase in net debt, accuse the government of spending too much, and then be keen to talk about boats and the carbon tax.

Abbott and Hockey are being disingenuous by bleating about the carbon tax not being in the budget, but it is in their interest to keep the debate centred on what they regard as negative turf for the government.

Gillard's challenge today is, as she said, to broaden the debate.

It will be difficult because yesterday's budget contained few surprises. It was austere and unspectacular, as it needed to be, and even reasonably mean.

For the first time in a long time, there were real and palpable spending cuts and savings, some of which are likely to cause displeasure. But there won't be widespread anger from rent seekers or battlers.

As one of the few beneficiaries, the mental health lobby should finally be happy, and industry bodies such as the Australian Industry Group, which called for many of the training measures in the budget, will be pleased.

In reality, the government has delivered a pretty good budget.

But soon it will be back to dealing with the unsolved problems at hand.

11 comments

If the carbon tax is was in fact revenue neutral, then why have it? How about all the pen pushers who will have to be employed to take the money away just to hand it out again...

Commenter

Nosher

Location

Earth

Date and time

May 11, 2011, 7:05AM

Listning to Gillard and Abbott going on and on makes oneenvy Belgium. They have managed fine without a governmentfor nearly a year.

Commenter

Greven

Date and time

May 11, 2011, 7:12AM

The Party of No would have dearly loved to jump onto their "carbon tax is a revenue raiser/wealth re-distributor/socialist plot" message but sadly for them that is not to be. Seems Labor continues to manage the economy soundly, despite all the distractions.

Let's say the carbon tax triples your power bill from 1000->3000 per year.

There's now a strong incentive for you to reduce your use of electricity (installing insulation, using less hot water, running your air-con slightly warmer in summer etc.)..

If the government also gave you back (in income tax cuts) $2000 (the increase of your bill) - you could either go on as per usual and be no better or worse off (the tax cut equals the increased bill).. OR you could live more efficiently (say reducing your bill from 3000->2000) and pocket the extra $1000.

So there's now a financial incentive for you to live more efficiently.

The same goes for the big emitters - they'll be compensated (say 95%) of the cost - so if they can reduce their emissions by 5% they'll be where they were before, if they can reduce them by even more, then they'll end up net winners. We know there are efficiency gains available that are actually very easy and cheap to implement, there's just little incentive at the moment because there's no cost in emitting CO2.

Commenter

Tsudo

Date and time

May 11, 2011, 10:07AM

Nosher, you appear to have missed the point of the carbon tax. It is not a revenue raising policy, it is a policy designed to reduce carbon dioxide pollution. If it is revenue neutral, that is largely irrelevant, and arguably a good thing (it would mean it does not affect the economy). If it were "carbon neutral", now that would be a problem... But "revenue neutral" is not a problem.

Commenter

Drew

Location

Canberra

Date and time

May 11, 2011, 10:19AM

Nosher | Earth - May 11, 2011, 9:05AMIt is a simple question to answer Nosher. Because items that are CO2 intensive in their manufacturer will be relatively more expensive; making you buy the less CO2 intensive option. And secondly, because the CO2 emitters will want to lower their tax burden by changing their processes to lower CO2 emissions & hence make themselves cheaper than their competitors.Have you not been following this debate for the last 5 years?

Commenter

Econorat

Location

Sydney

Date and time

May 11, 2011, 10:33AM

... If the carbon tax is revenue neutral, all the money it raises cannot be spent on compensation, government spin simultaneously echoed by Mr Coorey. The very least, there will be a large bureaucracy administering the matter: if it is paid from tax takings, less is left for compensation.

We also know that some takings are already earmarked for "green-economy" projects, further reducing compensation.

Commenter

morrgo

Date and time

May 11, 2011, 10:47AM

Yep, I'm with Jules! Got my alarm clock set to 5am, got my suit and tie, got my lunch box, got to work at 7.30am, beavered away to 6pm, got back home 7.30pm, and realised my entire life was being pissed away just to impress some management hack, cling to my job and accumulate more money. You want to live for your weekends? Good luck to you! I'm going for a walk in the sunshine.

Commenter

Max Gross

Location

xenoxnews.com

Date and time

May 11, 2011, 12:38PM

Fairy Tale dribble Phillip please..........this is a globally economic time critcial budget and all you can offer is platitude and simple logic that Abbott and hockey will heavily critqiue The Budget, as they should.

As I just wrote in Lenore's piece; "Lenore if Hartcher calls it "Not tough but responsible" and ... you "tough" it looks to me like the SMH is having an each way bet."

You are equally in the same boat. Surely a legitimate and responsible review is not beneath you all!!!

Commenter

blizzard

Location

Sydney

Date and time

May 11, 2011, 12:45PM

@JOFEK 9.21am "Seems labour continues to manage the economy soundly" From 20 Billion Surplus last year of Liberal Budget to 50 billion deficit 4th year of Labour more abused systemic rorts that have cost tens of Billions of dollars than anyone could ever believe or count they are still comming and still costing Sounds very much like SOUND economic management to me. People like you got the Illegitimate minority government you deserve and when they are done destroying this country and it's economy the Liberal/National coallition will do as they always have done, repair the damage and rebuild our economyNo Government of any pursuasion can operate as a Minority Government as thay are constantly held over a barrel by the minority parner in this case the Greens and the Three Drongo's this means that they can not get through policy that was part of the platform they went ot the election on and that includes FISCAL POLICY as can be seen by this Budget to many concession snot enough substance.

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